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Monday, 16 January 2012

In a recent case, the U.S. Court of Appeals for the Federal
Circuit sharply restricted a common litigation strategy used by defendants in
the U.S.: responding to a patent infringement complaint by filing a declaratory
judgment counterclaim alleging that all claims in the asserted patents are
invalid. In Streck, Inc. v. Research
& Diagnostic Systems, Inc., No. 2011-1044, ____ F.3d ___ (Fed. Cir.
Jan. 10, 2012), the appeals court held that a defendant generally cannot
maintain such a broad-brush counterclaim after the plaintiff formally restricts
its infringement contentions to specific claims.

Facts: Streck
sued R&DS for infringement of three patents covering hematology control
technology, including U.S. Patent No. 6,200,500 (the ‘500 patent). Streck’s
initial pleading alleged that R&DS infringed the patents without
identifying the specific claims alleged, as is common in U.S. pleading
practice. R&DS then asserted a broad declaratory judgment counterclaim,
seeking a declaration that the asserted claims in the patents were not
infringed and invalid. Such counterclaims are compulsory under the Federal
Rules of Civil Procedure, and commonly are asserted by defendants to gain
leverage in the event that a plaintiff seeks to limit its infringement claim to
specific claims in the asserted patents. Later, Streck and R&DS agreed that
their litigation, although pending in Nebraska, would be governed by the Local
Patent Rules adopted in the U.S. District Court for the Northern District of
California. Those local rules require the patentee to make binding disclosures
concerning the claims it actually contends are infringed. Under those rules,
Streck identified 13 claims it contended were infringed, and later amended its
disclosures to identify only nine claims. Nonetheless, R&DS sought a
declaration of invalidity and noninfringement on all but one of the over eighty
claims in the three patents-in-suit. When the district court declined to submit
R&DS’ declaratory judgment claims to the jury, R&DS appealed to the
Federal Circuit.

[D]efinite and concrete, touching the
legal relations of parties having adverse legal interests; and that it be real
and substantial and admit of specific relief through a decree of a conclusive
character, as distinguished from an opinion advising what the law would be upon
a hypothetical state of facts.

MedImmune, 549
U.S. at 127 (citations and quotations omitted). Applying that standard, the
court ruled that R&DS’ contentions concerning non-asserted claims in the
Streck patents lacked an actual controversy after Streck formally disclosed,
under that applicable rules, that it was dropping the claims from its
contentions, and R&DS could not establish an alternative basis for finding
a live controversy. Thus, under MedImmune,
“a [declaratory judgment] counterclaimant must show a continuing case or controversy
with respect to withdrawn or otherwise unasserted claims.” Streck, at 20. In addition, in order to establish declaratory
judgment jurisdiction, the defendant-counterclaimant must show that the actual
controversy existed at the time the action commenced and continued through
until the time of trial.

The court distinguished the situation where litigants
stipulate to “representative” claims, which are tried as a proxy for all claims
in a patent. The Federal Circuit indicated that a district court has
declaratory judgment jurisdiction over all claims in an asserted patent when
the parties stipulate that a few claims will be “representative” for purposes
of the litigation. See Scanner
Technologies Corp. v. ICOS Vision Systems Corp., 528 F.3d 1365, 1382-83
(Fed. Cir. 2008)(stipulation to representative claims does not limit court’s
jurisdiction to hold all claims in patent invalid). In the present case, however,
Streck formally limited its infringement contentions to specific claims in the
patent-in-suit. Furthermore, R&DS failed to show that an actual controversy
continued to exist as to the non-asserted claims.

As a result of this
decision, defendants hoping to gain leverage by maintaining invalidity
counterclaims against a broad group of claims, including non-asserted claims,
cannot merely rely on the fact that such counterclaims are compulsory. Instead,
they must independently show that all the claims are the subject of an actual
controversy, such as be demonstrating that a concrete dispute exists between
the parties on the defendant’s ability to lawfully operate without infringing
the claims. See, e.g., Sandisk Corp. v.
STMicroelectronics, Inc., 480 F.3d 1372, 1380 (Fed. Cir. 2007).